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National Vision Holdings, Inc. (EYE)

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Advanced Medical Optics, Inc. (EYE)

Q2 2008 Earnings Call

August 4, 2008 10:00 am ET

Executives

Jim Mazzo - Chairman & Chief Executive Officer

Michael Lambert - Chief Financial Officer

Randy Meier - President and Chief Operating Officer

Sheree Aronson - Investor Relations

Analysts

Joanne Wuensch - BMO Capital Markets

Christopher Cooley - FTN Midwest Securities

Peter Bye - Jefferies & Co.

Marc Goodman - Credit Suisse

Lawrence Keusch - Goldman, Sachs & Co.

Larry Biegelsen - Wachovia Capital Markets

Eric Lo - Merrill Lynch

Amit Bhalla - Citigroup

Jared Holz - Thomas Weisel Partners

Presentation

Operator

Welcome to AMO’s second quarter 2008 earnings conference call. (Operator Instructions) I am pleased to introduce Sheree Aronson, Corporate Vice President of Corporate Communications and Investor Relations.

Sheree Aronson

Joining me are Chairman and CEO, Jim Mazzo; President and COO, Randy Meier; and CFO Michael Lambert. After our prepared remarks by Jim and Randy all three will be available to take your questions.

During the call certain statements such as forecast of financial information, guidance, financial targets and goals, currency effects, cash flow and debt levels, strategies for growth, expected product performance, technology adoption and market share, expectations for markets and procedures and the impact of the US economic downturn, projected regulatory approvals, benefits and launch dates of new products, expectations for market share recovery in the multipurpose solution re-launch and for initiatives to reduce fixed costs and any other statements that refer to AMO's plans or estimated future results are forwarding looking statements.

As such they reflect our current analysis of existing trends and information and represent our judgment only as of the date of this call. Actual result may differ based on various factors affecting our business. Review today’s press release and our recent SEC filings, for more information about these risk factors, specifically the discussion under the heading "Risk Factors" and our 2007 Form 10-K. You'll find these and other documents in the Investors section at www.amo-inc.com or by calling 714-247-8455.

Let me remind you that beginning last quarter we made changes to the way we break down our sales and the global sales tables that accompanies our earnings releases. If you need more information you’ll find details regarding the changes on slide three of the presentation. Finally please note that our adjusted EPS and adjusted operating margin guidance are provided on a non-GAAP basis and exclude the impact of charges and write-offs related to acquisitions, reorganizations, restructurings and recapitalizations, unrealized gains or losses on derivative instrument and other periodic or one-time charges or gains.

Refer to the Investors section of our website under historical financial for more information on our use of non-GAAP measures. Unless we identify a number as adjusted in our remarks or in the accompanying slides, you can assume that it is a GAAP number. Remember too that any reference to pro-forma growth rates reflect comparisons that include IntraLase’s performance as if this acquisition had occurred in all periods presented.

With that I will pass the call to Jim.

Jim Mazzo

AMO’s second quarter results show the strength and resiliency of our global presence and businesses. Despite cyclical declines and domestic refractive volumes we delivered sales and market share gains in multiple categories, achieved our margin expansion and improved our cash flow. Throughout the quarter we remained focused on our four key priorities.

Number one, leveraging our global refractive leadership and advancing our complete refractive solution business model; our refractive sales were virtually unchanged on a constant-currency basis despite a double-digit drop in our U.S. excimer procedures. Now, this underscores the growing strength of our international refractive footprint. Our total international refractive sales rose 40% of solid growth in all product categories and regions.

International unit placements of excimer and femtosecond systems also rose 37% as demand for our leading technologies remained high and we continue to grow our share, the installed-base. Despite the tough U.S. market the competitive advantages of our highlighted platform continue to resonate with customers as we grew both excimer and femto market share according to the latest markets of debt.

Number two, achieving on-time delivery of clinical products, pipeline products across all the three businesses. These technologies were key contributors to second quarter cataract and eye care performance helping us gain share in multiple categories. Tecnis, intraocular lens sales rose 38% and helped drive total IOL sales up 16%.

We launched the Tecnis 1 Piece to US surgeons in May following its release in Europe in the first quarter and we expect this IOL which marked our entry into the large single piece category to help us drive sales and share growth in the second half of ’08 and beyond. During the quarter we also continue to promote our new WhiteStar Signature platform and prepared for commercial lease of the Ellips Transversal phaco feature as well as other enhancements to improve the platforms functionality and ease of use.

Phaco system sales we’re particularly robust nearly doubling the year ago levels on a dollar basis. Continued WhiteStar Signature penetration also helped drive phaco pack and viscoelastics sales in the quarter. Expansion of our blink Tears line continued in the quarter with a unit dose offering now in retail shelf. In the U.S. we also launched blink gel Tears specifically designed for patients with moderate to severe dry eye.

Number three, growing our Multi purpose solution market share and returning our eye care business to sustained profitability and growth. At $58 million our Multi purpose sales were stable compared to the first quarter -- I meant to say our Eye Care sales were stable compared to the first quarter. We estimate our second quarter share of the global branded MPS market which reflects retail sales at approximately 10.7%.

Adding to this was solid performance from our other Eye Care product segment, which grew by double-digits in the quarter. Importantly, the Eye Care team is continuing to not only drive sales, but also improve Eye Care’s overall profitability and number four, increasing our operational efficiency in cash flow to facilitate debt reduction.

Operating margins expanded during the quarter as we grew sales by keeping a tight reign of our operating expenses. We are on scheduled with our plans to reduce fixed cost, to increase headcount efficiency and better facility utilization which are expected to reduce spending by $47 million in the second half of ’08 with the full benefits of $12 million to $16 million in savings expected in ’09.

We generated approximately $58 million in cash flow from operations, which allowed us to reduce total debt during the quarter. Michael and his team also moved proactively to secure amendment to a revolver credit facility which eases our debt-to-EBITDA ratios beginning later this year and extending into 2011.

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